B shares fall on weak­en­ing ren­minbi

For­eign-cur­rency de­nom­i­nated stocks are small part of Shang­hai and Shenzhen mar­kets

China’s B shares plunged on Mon­day after the value of the ren­minbi against the US dol­lar slid to the low­est in six years.

The gauge of the B shares, the for­eign-cur­rency de­nom­i­nated stocks of Chi­nese com­pa­nies listed in Shang­hai and Shenzhen, tum­bled by 6.15 per­cent to 335.68 points.

The slump also weighed on the RMB-de­nom­i­nated A shares on the bench­mark Shang­hai Com­pos­ite In­dex, which tracks both A and B shares, which fell 0.74 per­cent to close at 3,041.17. The sud­den mar­ket sell­off in late trad­ing came after the value of on­shore RMB slumped to 6.74 against the US dol­lar as ofMon­day af­ter­noon, the low­est level in six years.

An­a­lysts said that the weak­en­ing yuan could be the fac­tor that trig­gered the sell­off of the B shares. But, they said Mon­day’s slump is un­likely to have sub­stan­tial im­pact on the A-shares given the small mar­ket cap­i­tal­iza­tion of the B shares.

“The sud­den slump of B shares could be trig­gered by the for­eign ex­change­fac­tor. Theliq­uid­i­tyof the B shares is very lim­ited so any sin­gle trad­ing ac­tiv­ity could cause big move­ment,” said Song Jin, an an­a­lyst at Dongx­ing Se­cu­ri­ties Co Ltd.

All eyes are now on China’s third quar­ter eco­nomic data in­clud­ing theGDP­fig­ure, which is sched­uled to be re­leased on Wed­nes­day and could in­flu­ence in­vestors’ trad­ing de­ci­sions on the Chi­nese stock mar­ket.

The con­sen­sus fore­cast by econ­o­mists sur­veyed by Bloomberg on China’s third quar­ter GDP growth is 6.7 per­cent.

“A down­side miss would trig­ger hard-land­ing wor­ries and an up­side sur­prise would trig­ger over­heat­ing/lever­age wor­ries. The Shang­hai Com­pos­ite has climbed the wall of worry since Fe­bru­ary and we re­main of the view that it will be among the top per­form­ing Asian stock mar­kets in the fi­nal four months of the year,” said Tim Con­don, chief Asia economist at ING Bank.

The Chi­nese cur­rency is fac­ing ris­ing de­pre­ci­a­tion pres­sure against the dol­lar as it is be­com­ing in­creas­ingly clear that theUS Fed­eral Re­serve may be pre­par­ing the mar­kets for an im­mi­nent rate hike this year which should keep the dol­lar bullish, said Luk­man Otunuga, a re­search an­a­lyst at FXTM Ltd, an on­line cur­rency trader.

But, Otunuga noted that in­vestors may di­rect their at­ten­tion to China’s third-quar­ter GDP re­port which could of­fer some clar­ity on how the coun­try is far­ing.